Skip to content

Tax cools real estate sales – but not prices

The number of properties sold in Burnaby has declined – but so far prices aren’t dropping to match
SOLD
Buyer’s market? The number of house sales in Burnaby has stalled, but prices aren’t cooling – at least not yet – according to the latest numbers.

The B.C. government’s foreign buyers’ tax has stalled the volume of real estate transactions in Burnaby, according to statistics from the Real Estate Board of Greater Vancouver.

Prices, however, continue to increase, despite modest corrections since the tax rolled out six months ago.

The policy adds 15 per cent to home purchases by buyers without Canadian citizenship or permanent residency, while locals purchasing homes with foreign-based assets remain unaffected.

The number of detached properties sold in the city in February 2017 decreased threefold when compared to the same month last year, while the number of attached and condo sales less than halved.

The real estate board data also shows benchmark prices in all sectors of Burnaby’s real estate market rose between 2016 and 2017, including the detached sector, which saw the highest post-tax decreases but became nevertheless pricier year-end, as indicated by the MLS Home Price Index.

“The tax greatly impacts detached and luxury sales,” says Realtor David Song. “Sellers have reduced their prices and the volume of transactions have lowered. We have seen few multiple offers and competitive biddings that were commonplace prior to the tax.”

He adds condo sales have not been significantly affected, as the tax translates to less-burdensome totals when applied to lower-cost properties.

“Presales of new highrise developments continue to be in hot demand in certain areas, such as Metrotown and Brentwood,” says Song.

Song notes Burnaby real estate prices soared in recent years due to high demand from both newcomers and investors, and that the majority of investors are local.

Another Realtor, Michael Fong, believes the tax has brought uncertainties to the market.

“In my opinion, many are waiting to see the policy’s effects before making a decision, particularly if the transaction involves a pricier detached propert,” he says. “On the other hand, many sellers still need time to adjust to the new lower demand, because many still base their valuations on their neighbours’ selling prices from pre-tax 2016. This may be why we see more of a drop in demand than prices.”

Transnational factors may also contribute to the falling demand, according to Song.

At the beginning of this year, China imposed news rules on large cash transactions, which can no longer be done via smartphone apps.

According to the Xinhua News Agency, Chinese banks now require paperwork detailing the date and intended use of yuan-denominated transactions exceeding 50,000 yuan (around $9,700 Canadian dollars) or foreign-denominated transactions exceeding US $10,000.

China limits per capita outflows of US $50,000 per year, unless there is proof of use in trade, foreign direct investment and other approved purposes.

“Policies abroad cannot be overlooked as factors in the local Burnaby real estate market,” Song says. “If other countries make it more difficult for Canadian residents to withdraw money from their foreign accounts, it will impact local purchasing power.”

A March 2017 market report released by Sotheby’s International Realty Canada, titled China to Canada: International Home Buyer Insights, predicts local and international confidence will return in the long term.

According to MLS, Burnaby currently ranks sixth in the Lower Mainland on average home price, at $869,000, behind West Vancouver, Vancouver, North Vancouver, Delta and Richmond.